On the back of photovoltaic tariffs for Chinese manufacturers exporting modules into the U.S., expectations were that the Chinese market would become a substitute for its domestic manufacturers. However, judging by Q3 shipment estimates, the market has not quite taken off as some had predicted. Robert Dydo, CEO-Editor SolarPVInvestor and Jason Tsai, chief analyst Solarzoom PV Research Center discuss.

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After the 25% drop in revenue experienced by Taiwanese cell manufacturers in Q3 2012 compared to the prior quarter, it would be practical to suspect that module shipments for U.S.-listed Chinese companies could leave some with a gap to meet their guidance. In support of this suspicion, Chinas domestic solar market, which was supposed to substitute for the U.S. market  now cordoned off by import duties  has been regularly described as gloomy and disappointing.

While manufacturers tried to dispose of inventories in pursuit of cash and liquidity, cash-poor conditions seemed to spill into solar plant development and keep it at bay. Despite swift and seemingly reaction-driven announcements to save the industry by Chinas central and provincial governments, there was no transparency to improvement.

Frank Xie, senior PV analyst from IMS Research, as recently as October 10, said he expected to see four GW of installations in 2H 2012. There are too few projects moving into the construction phase, Xie noted, leading to the likelihood of a volume-busy Q4. This further suggests that Q3 results for the Chinese module makers could be very sketchy.

Likewise, the lack of an accurate understanding of the domestic module segment makes it difficult to speculate on the shipment quantity into the region.

Based on Q2 guidance for the third quarter expectations, global module shipments guided by Suntech Power Holdings Co., Ltd. (NYSE:STP) were around 480 MW, Yingli Green Energy Hold. Co. Ltd. (NYSE: YGE) were around 500 MW, for Trina Solar Limited (NYSE: TSL), 450 MW, and Canadian Solar Inc. (NASDAQ: CSIQ), about 420 MW. Meanwhile, the export data gathered by Solarzoom and analyzed by SPVI with the help of Jason Tsai, estimates Suntech exports at 382 MW, Trinas at 378 MW and Canadian at around 307 MW.

Therefore, it appears that if the domestic market receives 20% of the shipments, both Suntech and Trina can land near their guidance. Canadian Solar, despite not having expectations for big sales in China, is running apparently at nameplate capacity in Ontario. However, shipments from this location would not be in the export figures, so it is harder to estimate how close it would get to reaching the target. Speculating a full 50 MW contribution from Canada, CSIQ would have shipped 357 MW; thus, reaching 33 MW for the Chinese market to meet the bottom of its guidance would seem very plausible.

In the case of shipments from Yingli, JA Solar Holdings Co., Ltd. (NASDAQ: JASO) and JinkoSolar Holding Co., Ltd. (NYSE: JKS) numbers appear to be more concerning, but such anxiety may not be necessary. Analyzing obtained data, Yingli shipped 272 MW, JA around 80 MW and Jinko, 83 MW. It looks like Yinglis domestic sales would have to be in the area of 45% of 500 MW to meet its guidance, while SPVI was expecting 25% of total sales.

Of course, our analysis is speculative and cannot be considered complete; nevertheless, this percentage is large enough, even with the possibility of an error. Additionally, if things appear really difficult for Yingli, JA Solar and Jinko, estimates for the domestic market seem even more demanding. In order to meet their guidance, Jinko would have to ship 70% of the total guidance to the Mainland China, while JA would have to ship 67%. Both companies are quite active domestically. JA announced 160 MW of bids won with China Power Investment and China Guangdong Nuclear Solar Energy. Jinko had also announced 170 MW of bids and contracts in China in the last four months.

In addition to CGN and CPI, Jinko sold modules to GSHHSD and Three Gorges New Energy. Readers should keep in mind that Yingli drew 5% and then 14% in revenue from China, during Q1 and Q2 respectively, without announcing a single deal. Although Yingli is not going public with business at home (as far as SEC announcements are concerned), still the company laid out expectations of 20% of revenues from the mainland, this year. Anticipating deep discounts to ASP at home, it would be easy to assume that the shipment volume would be proportionately higher, easily into the 30% or higher range, to meet this estimate.

While the concern for the above three companies borderlines on hopeful optimism, LDK Solar Co., Ltd (NYSE: LDK) is left to count only on the domestic market for module sales. Based on the data, LDK apparently only exported 32 MW out of its 160 MW guidance. With financial turmoil, which led LDK to sales of 16% of the total equity to Heng Rui Xin Energy Co., Ltd last week, it is no surprise that the company would experience limited sales abroad. In many eyes, particularly of those of foreign entities, LDK is already bankrupt and only artificially held upright by the government.

Lastly, it appears that three companies may be in a better place than anyone else this quarter. Hanwha SolarOne Co Ltd (NASDAQ: HSOL) guided 230 MW of modules sales in Q3, while ReneSola Ltd. NYSE: SOL) shows 170 MW, at the high end of its guidance. Solarzoom data estimates exports of 205 MW and 184 MW for each. Both companies have not announced particularly intense plans for China, either.

Quite the contrary, American and Australian markets have been dominating ReneSolas landscape, while for Hanwha, Belgium, the U.S. and South Korea were most productive. ReneSola recently had American developers visit its own plants and made an effort to point out that every module made for the U.S. market is assembled, with cells made outside of China.

In the case of Hanwha SolarOne, the recent purchase of Q.Cells by parent Hanwha Group makes it possible to restart the U.S. markets with Malaysian-made cells, after the company had no shipments to the U.S. in Q1 and only 7% in Q2.

Finally, China Sunergy Co Ltd (NASDAQ:CSUN) should not have trouble meeting its guidance numbers, as we have observed the company to export around 77 MW out of 85 MW of guidance given for Q3. Sunergy had received 10% of its revenues each quarter out of China this year; therefore, we expect no issue reaching the figure.

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